Welcome to the latest edition of Cointelegraph’s Decentralized Financial Newsletter.
Although the market has released bearish numbers for the second week in a row, the industry is not short on bullish fundamental news. Read on to hear about the most influential DeFi stories of the past seven days.
What you are about to read is a shorter, more concise version of the newsletter. For a comprehensive summary of DeFi developments over the past week, subscribe below.
Vitalik is optimistic about a multi-threaded, not cross-threaded world of Web3
Ethereum co-founder Vitalik Buterin shared a candid assessment of the security limitations of implementing fully functional cross-chain bridges in the blockchain industry.
Buterin argued that storing assets on its parent chain offers a 51% higher level of security against attacks than cross-chain activities, noting that “it is always safer to hold Ethereum assets on Ethereum or Solana origins on Solana than it is to hold Ethereum native assets on on Solana or Solana’s native assets on Ethereum.”
My argument for why the future is *multi-chain*, but won’t be *multi-chain*: There are fundamental limits to the security of bridges that jump across multiple “sovereign areas”. From https://t.co/3g1GUvuA3A: pic.twitter.com/tEYz8vb59b
– Vitalik.eth (@VitalikButerin) January 7 2022
Sharing a series of examples to prove his thesis, Buterin noted that if a malicious entity attempts to launch a 51% attack on Ethereum, a transaction by an innocent party can be censored and/or rolled back, but not blocked and not lost.
In extreme cases, users’ funds will remain safe even if 99% of the protocol is compromised because the nodes will overwhelmingly support the remaining 1% blocks to follow the rules and, thus, govern the decision-making process.
In contrast, an incident of this type acting on a cross-chain bridge between Ethereum and Solana, for example, would lead to irreversible losses, argues Buterin. The problem is compounded with the addition of strings.
Let’s say a 51% attack occurs on one of 50 threads. In this case, they each become vulnerable in what he describes as “a systemic infection that threatens the economy of that entire ecosystem.”
dYdX strives to achieve full decentralization in late 2022
Layer 2 derivatives protocol dYdX published version 4 of its roadmap this week, presenting plans to evolve the platform into a fully decentralized, community-focused open source process later this year.
The architecture runs on a dual model in which the protocol sections, such as staking and governance, are decentralized, while core functions such as the off-chain order book and matching engine are controlled by an internal affiliate, dYdX Trading Inc and backed by central servers such as Amazon Web Services.
Following the version 4 upgrade, company representatives stated that “there will be no central control points or protocol failures,” stressing that “all aspects of the protocol that can be controlled will be fully controlled by the community.”
The Amazon Web Service (AWS) technical outage last month highlighted the real vulnerabilities of a number of crypto companies, including dYdX, Binance.US and Coinbase, and their inherent reliance on central servers to maintain the network.
At the time, dYdX shared an honest update on its official Twitter account and vowed to look for an unequivocal solution to the matter, saying:
“Unfortunately, there are still some parts of the exchange that depend on centralized services (AWS in this case). We are deeply committed to fully decentralizing, and this remains one of our top priorities as we continue to work on the protocol.”
Besides its aspirations towards decentralization, dYdX is also seeking improvements to its trading platform, offering spot, margin and synthetic trading opportunities, as well as hiring an external auditor to evaluate trade operations.
Near Protocol raises $150 million to accelerate Web3 adoption
Proof of Stake blockchain Near Protocol raised $150 million in initial investment this week to promote awareness and adoption of Web3 applications within its network, with an inherent focus on expanding its audience and community base into Latin America, Turkey and India regions.
The capital increase was led by the famous hedge fund Three Arrows Capital and also involved Mechanism Capital, Dragonfly Capital and Andreessen Horowitz Fund in Silicon Valley a16z. Among the individual funded investors are British billionaire Alan Howard, hedge fund manager, and founder of Aave Stani Kulechov.
In a blog post on Medium, Marek Flament, CEO of the Near Foundation, shared her optimism about the recent funding, around which it worked out the previous total of $65.9 million raised by the company:
“We are delighted to have such an impressive list of supporters supporting the NEAR mission. We look forward to leveraging the funding to improve access to blockchain technology in an ever-growing list of countries around the world.”
In October 2021, the smart contract platform committed $800 million to new initiatives within the field of decentralized finance (DeFi), such as developer applications, startup grants, and geofinance pools.
Analytical data reveals that the total value of locked-down DeFi declined slightly by 2.77% over the week to a figure of $128.15 billion, continuing along with the broader market decline.
Data from Cointelegraph Markets Pro and TradingView reveal that the top 100 DeFi tokens by market capitalization were mainly bullish. the past seven days.
Secret (SCRT) took the lead for the second week with 15%. Terra (LUNA) is up 6.32%, while the 1inch (1inch) network posted a gain of 2.9%.
Interviews, features and other cool stuff
Thank you for reading our summary of the most influential DeFi developments this week. Join us again next Friday for more stories, ideas, and education in this dynamically evolving space.